Binyamin Netanyahu ready to take charge of new Israeli government

Likud Party leader Benjamin Netanyahu is set to preside over a coalition including the left, the ultra-orthodox and the secular extreme right. Photograph: Dan Balilty/AP

After weeks of late-night negotiations, power-broking and patronage politics, the new Israeli government will be sworn in today, with Binyamin Netanyahu, leader of the rightwing Likud party, presiding over a motley coalition of the left, the ultra-orthodox and the secular extreme right.

The new government, which will have 69 of 120 seats in the Israeli Knesset, marks Netanyahu's return to the prime minister's office after his premiership of the late 1990s. Avigdor Lieberman, of the extreme right Israel Our Home party, has been appointed foreign minister, while Ehud Barak, leader of the electorally diminished Labour party, will keep his role as defence minister.

The centrist Kadima party, which won the election by one seat but could not form a coalition, has declined to be a part of Netanyahu's government.

Speaking in the Knesset yesterday, Netanyahu said his government would make every effort to secure "a durable peace with all of Israel's Arab neighbours". But critics fear the new coalition, dominated by the hard right, could have dire consequences for the Palestinian-Israeli peace process.

"Netanyahu doesn't believe in the feasibility of a two-state solution and thinks permanent status solutions are a waste of time," said Shlomo Brom, senior research associate at the Institute for National Security Studies.

Brom suggests the incoming premier might pursue interim arrangements such as the easing of Israeli roadblocks in the West Bank, or the dismantling of settler outposts. Paradoxically, he adds, a rightwing government could be more able to initiate these measures unopposed. However, other commentators wonder if Netanyahu's rightwing and religious coalition partners are likely to smooth such practices through parliament.

In recent days, the EU has told Israel's incoming government that relations would be "very difficult" if it did not accept the principle of a Palestinian state.

Writing in the Washington Post a few days ago, Saeb Erekat, the chief Palestinian negotiator, urged the Israeli government to order a complete halt to settlement activity and publicly commit to the two-state solution. "The peace process lives on borrowed time. With its credibility at stake, it will not survive another round of failed negotiations," he warned. Netanyahu and Lieberman are reported to have struck a deal last week to build 3,000 new housing units around East Jerusalem.

Iran - and its nuclear capacity - is likely to be a priority for the new government, which some commentators say could kick-start negotiations on the Syrian track.

"This government could push for a deal with Syria as a geo-strategic change in the region, to isolate Iran," says Moti Crystal, negotiations expert and adviser to the outgoing government. Peace treaty talks, based on returning the Israeli-occupied Golan Heights to Syria, were going on under the exiting Israeli prime minister, Ehud Olmert, but the Bush administration did not back the discussions. However, Barack Obama's new emphasis on diplomacy in the Middle East could lend credence to this peace track.

The incoming prime minister created several cabinet positions to distribute among the factions of his government.

• This article was amended on Thursday 2 April 2009. We originally said that Avigdor Lieberman and Binyamin Netanyahu were reported to have struck a deal last week to build 3,000 new settlements around East Jerusalem. In fact, the alleged deal involves 3,000 new housing units. This has been corrected.